The promise of a digitally-enabled circular economy

Where is innovation heading in the 21st Century? For every new technology poised to reinvent the way we live, work and interact, there seem to be many more incremental or even superficial improvements, rolled out by businesses wrestling for customer dollars. Enter the circular economy: a rich and largely untapped seam of innovation that not only works for businesses, citizens and governments, but can also support the switch to a positive development path for the global economy.

This comes at a time when the linear ‘take-make-dispose’ model that worked so well for so many is starting to reveal its limitations. A loud chorus, dispersed across countries and industries, is calling for a new model, one that embraces feedback, encourages regeneration and facilitates access and abundance. The digital revolution holds a lot of promise for this circular economy, and there’s good reason to be optimistic about the future, in which emergent trends in technology and computing enable us to move to a model that understands and harnesses flows of resources, energy and information, creating the conditions for a new 21st century prosperity.

In the past six years, this has gone beyond theory alone. In the 2015 study Growth Within: a circular economy vision for a competitive Europe, the Ellen MacArthur Foundation, McKinsey and SUN estimated that the circular economy could be worth €1.8 trillion to Europe by 2030. That’s just over USD 2 trillion, or roughly the GDP of India.

What’s more, Growth Within suggested that the lion’s share of the economic opportunity highlighted in the report is directly linked to technological advances. Tracking systems and mobile apps, whether as a key driver or a convenience factor, allow for a considerable jump in asset utilisation rates as well as material flows optimisation, the benefits of which add up to EUR 1.2 trillion – two thirds of the overall potential. So these new tools and techniques are helping businesses take practical steps to support the transition to a circular economy, but the connection is even more profound. As Samuel Arbesmn stresses in his recent book Overcomplicated, the more we understand digital networks, the more we realise that it’s not enough to make isolated tweaks and expect improvement or a quick fix. That means that if we really want to tackle the difficult economic, social and environmental problems of today and tomorrow, then systems thinking skills, in conjunction with the technology to understand systems, will be essential to build resilience and thrive in an uncertain future.

William McDonough has stressed how businesses should first identify their values and principles before setting targets or objectives, and this philosophy should also be applied to the digital revolution. While the pace of innovation around areas like the internet of things, automation, cloud computing, deep learning and digital fabrication is undoubtedly rapid, without an overarching set of principles, we’ll remain on a primarily linear development path. This would only scratch the surface of the potential benefits found when the digital revolution unfolds in concert with the circular economy. The following principles could provide much-needed vision for current disruptive trends:

Optimise resource yields – by circulating products, components, and materials at the highest utility and value at all times in both technical and biological cycles.

Foster system effectiveness – by revealing and designing out negative externalities.

What does this mean in practice?

This could mean more access to services and at the same time less material consumption. One car benefiting five users, through a sharing platform, is the obvious example. It’s not so much how much stuff you manage to sell, it’s how you manage the assets to make the most of them and generate revenue through service provision. Some pioneers are already thinking this way – just take a look at Elon Musk’s latest Tesla strategy, which covers renewable energy, accessible mobility and “enabling your car to make money for you when you aren’t using it”.

Rather than consuming materials and extracting value from selling assets, we can foresee a regenerative model which maintains and builds capital. This includes natural capital; applying technology not just to increase efficiency and ‘do less bad’, but to monitor land degradation, localised and specialised management of nutrient loops, and biodiversity.

At the heart of the circular economy lie design for product life extension through restorative activities like repair and remanufacturing, or for the recovery of material value. This becomes possible when IT is powerful and pervasive enough to enable those loops, when smart and connected objects can not only perform tasks, but can also give information regarding what they’re made of, where they are, and how they can be upgraded or repaired. In a way, you could say that in the pre-digital world we used to work for materials, and now materials work for us.

The first Industrial Revolution was about steam, water mills and the first age of machines. The second one introduced electricity, which during the second half of the 20th century morphed into electronics, ICT and automation, or the third revolution.

The deep transformation we’re experiencing now is sometimes called the fourth Industrial Revolution, and its digital backbone has the potential to profoundly transform our relationship with the material world. Guided the circular economy framework, it can put us on a positive path to a regenerative economy.

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